Staatsolie and offshore partners from Block 52 sign Letter of Agreement

04 March 2024

Staatsolie Maatschappij Suriname N.V. signed a Letter of Agreement (LoA) with PETRONAS and ExxonMobil on Monday, March 4, 2024. The LoA is necessary for further exploration of the gas discovery made in 2020 with the Sloanea-1 exploration well in Block 52.

PETRONAS made a gas discovery in 2020 in Block 52 in the Surinamese offshore area. This involved a small quantity that was initially seen as commercially unattractive to develop into a production field. The development of an offshore gas field is more challenging and complex to explore in technical and economical perspective than an offshore oil field. Nevertheless, Staatsolie and PETRONAS have held intensive discussions in recent years to further explore the Sloanea-1 gas discovery. These conversations led to the LoA. This LoA is an agreement that broadly sets out the agreements, principles and conditions to further investigate and increase the feasibility of the development of a commercial gas field in Block 52. An important part of the feasibility is the guarantee of a tax-free period of ten years from the start of production. This has also been recorded in the LoA with the approval of the government. In the world, tax exemption for investments in offshore gas projects is not unusual and is aimed at making the project economically viable.

The LoA serves as a basis for further negotiations for an addition, a so-called 'Gas Addendum', to the production sharing contract (PSC) for Block 52 that was signed in April 2013. The PSC contains detailed provisions for the development of an oil discovery into a production field. In the event of a gas discovery, the PSC prescribes that parties will have to negotiate a 'Gas Addendum'. This addition to the production sharing contract will establish the procedures and conditions under which the Block 52 partners PETRONAS and ExxonMobil can assess the gas discovery and possibly subsequently develop and produce it. Because the negotiations for the Gas Addendum can last almost a year, the agreements made so far in the negotiations are recorded in the LoA.

The LoA was signed by Datuk Adif Zulkifli, Executive Vice President & CEO Upstream of PETRONAS, Paul Riley, Branch Manager of ExxonMobil Exploration and Production Suriname, and Annand Jagesar, Managing Director of Staatsolie.

PETRONAS is excited about achieving this milestone with Staatsolie and will drill the Sloanea-2 appraisal well from April 2024. A production test will also be carried out. The drilling platform is now drilling the Fusaea-1 exploration well in Block 52 and already drilled the first part of the Sloanea-2 well in February. For PETRONAS and ExxonMobil, the LoA is therefore important to proceed with the Sloanea-2 well. After the Sloanea-2 appraisal well has been drilled, it will be determined whether a commercial gas field is feasible. In that case, the first gas production would be around 2031 at the earliest, taking into account the construction time of the production installations. A possible commercial gas field will be developed via a “FLNG project”. FLNG (Floating Liquefied Natural Gas) means that the gas is extracted from a floating production platform, liquefied and stored for transport by gas tankers.